Two-time finalist for Gerald Loeb Award - this year for Forbes magazine work and in 2010 for online commentary and blogging. I am a C.P.A. and freelance journalist with credits in the Financial Times, Boston Review, American Banker, Columbia Journalism Review, Accountancy Age, Accountancy Magazine, Forbes, and others. I also blog at my own site, re: The Auditors, a specialized news site about the business of the Big 4 audit firms. I have been quoted in the New York Times, Wall Street Journal, Chicago Tribune, Crain's Chicago Business, Chicago Magazine, Chicago Sun-Times, Financial Times, Reuters, Forbes, Harvard Business Review, BusinessWeek, American Lawyer, California Lawyer, American Banker, Columbia Journalism Review, The Times of London, The Guardian, the Financial Chronicle (India) and others. To reach me email fmckenna2010@gmail.com.

The disciplinary orders issued by the SEC and PCAOB were merciless in their condemnation of the PW India audit practice. The regulators emphasized compliance and quality failures had occurred in the Satyam audit over a number of years. Even worse, quality and compliance failures were occurring throughout the entire PW India audit practice.

Specifically, the PW India partners and staff on the Satyam engagement team failed to maintain control of the confirmation process with respect to cash and cash equivalent balances as well as Satyam’s accounts receivables. The failure to properly execute third-party confirmation procedures resulted in the fraud at Satyam going undetected until the former chairman’s public confession in January 2009.

The failures in the confirmation process on the Satyam audit were not limited to that engagement, but were indicative of a quality control failure throughout PW India.

The regulators now require PW India to implement significant remedial actions. Much of this is already in progress. What’s missing from the watchdogs’ harsh judgments and stiff mandates is any assignment of responsibility or accountability for the failure of the Indian practice as the Satyam auditor to the U.S. firm or the PwC International firm.

The SEC and the PCAOB would not confirm that their enforcement actions regarding the Satyam audit were finished. That means we may still see sanctions against culpable individuals and entities besides the PW India firm. Mahindra Satyam, as it is now called, has also threatened to sue PwC firms to recoup some of the $125 million they agreed to pay to investors when they settled their part of the New York class action litigation. The company may be waiting for the results of local criminal proceedings against the PW India partners.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.